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Hayek and Cowboys

The settlement of the American West during the nineteenth century produced a flourishing Hayekian legal because of the extended absence of state-based legal systems from large parts of the West. Without the crowding out of private law that accompanies the state's assertion of a monopoly over some areas of the law and subsidized competition in others, individuals created dispute resolution mechanisms and rules based on custom and contract. These examples of systems built by not-particularly-well-educated cowboys, gold miners, and migrants suggest that Hayekian legal orders can serve as effective, complete substitutes for state-provided law.

This paper surveys Hayek's legal theory, primarily as set forth in Law, Legislation, and Liberty, and then examines three customary law institutions from the nineteenth century West: mining camps, cattlemen's associations, and vigilance committees. The paper concludes that all three showed some of the key characteristics of a Hayekian legal institution.

The Western experience suggests three lessons for reviving Hayekian legal institutions. First, steps that reduce the state's attractiveness as a means of plunder will diminish the plunder interest group's demand for the state's crowding out of private legal institutions. The Takings Clause, for example, restricts the ability to plunder by requiring the state to pay market prices for resources it takes. [1] Interpreting restrictions on takings broadly can thus reduce the lure of plunder and provide a greater space for the development and survival of Hayekian legal institutions. Second, ending the subsidization of state provided legal services (e.g. the minimal charges for filing law suits) will prevent crowding out of private efforts to provide the same services. Third, these examples flourished on the frontier. The frontier is a difficult place. Conditions are harsh, social capital spread thin, and many of the institutions we take for granted are missing or scarce. Yet the frontier is also a place where Hayekian legal institutions flourish. Moreover, those institutions were lost as civilization advances on the frontier. This suggests that looking on current frontiers is a good place to find Hayekian legal institutions.

The larger conclusion is that the Western experience confirms some important aspects of Hayek's legal theory. Spontaneous legal orders are present in societies of great wealth, with cultures not overly dissimilar from today's, not only in medieval Iceland and Anglo-Saxon England. For all the real problems that exist in Hayekian legal theory, it accurately describes real institutions not just utopias.

[1] See Richard A. Epstein, TAKINGS: PRIVATE PROPERTY AND THE POWER OF EMINENT DOMAIN (1985).